For Immediate Release
Chicago, IL – July 17, 2018 – Zacks Equity Research highlights Avid Bioservices CDMO as the Bull of the Day, Mellanox Technologies MLNX as the Bear of the Day. In addition, Zacks Equity Research provides analysis onBerkshire Hathaway BRK.B, Intel Corp INTC and Chevron Corp. CVX.
Here is a synopsis of all five stocks:
Bull of the Day:
Avid Bioservices just came out with a quarterly loss of $0.14 per share versus the Zacks Consensus Estimate of a loss of $0.15. This compares to loss of $0.28 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of 6.67%. A quarter ago, it was expected that this contract manufacturer would post a loss of $0.14 per share when it actually produced a loss of $0.23, delivering a surprise of -64.29%.
Over the last four quarters, the company has surpassed consensus EPS estimates two times.
Avid Bioservices, which belongs to the Zacks Medical - Biomedical and Genetics industry, posted revenues of $6.94 million for the quarter ended April 2018, surpassing the Zacks Consensus Estimate by 6.65%. This compares to year-ago revenues of $17.90 million. The company has topped consensus revenue estimates two times over the last four quarters.
Shares were up immediately after the report was released, and this price movement will reflect how these results and management's commentary on the earnings call help shape expectations for the coming quarter(s).
Avid Bioservices shares have added about 19.6% since the beginning of the year versus the S&P 500's gain of 4.8%.
What's Next for Avid Bioservices?
While Avid Bioservices has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?
There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.
Ahead of this earnings release, the estimate revisions trend for Avid Bioservices was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Bear of the Day:
Mellanox Technologiesis a $4 billion provider of essential semiconductor-based, interconnect products to world-class server, storage, and infrastructure OEMs servicing Fortune 500 data centers, the world's most powerful supercomputers, and mission critical embedded applications.
Mellanox is scheduled to report Q2 earnings after the close this afternoon and given recent EPS estimate bumps by analysts we should be expecting an upside earnings surprise. The quantitative screen known as the Zacks Earnings ESP (Expected Surprise Prediction) has calculated the potential for an approximate 4% beat on the bottom line. The company delivered an 18% positive surprise for Q1.
I like this player in the fast-growing HPC (high-performance computing)/hyper-scale data center space so much, I went and bought the stock last week. The company's Virtual Protocol Interconnect enables standard communication protocols to operate over any converged network (InfiniBand, Ethernet, Data Center Ethernet) with the same software solution.
The TOP 500 Supercomputers in the World
What put Mellanox on my radar, besides the Zacks Rank, was the semi-annual TOP500 Supercomputer List which was published June 25. This key industry ranking found that an IBM-built supercomputer called SUMMIT, now running at the Department of Energy’s Oak Ridge National Laboratory, captured the number one spot with a performance of 122.3 petaflops on High Performance Linpack (HPL), the TOP500 List benchmark.
SUMMIT has 4,356 nodes, each one equipped with two 22-core IBM Power9 CPUs and six NVIDIA Tesla V100 GPUs. The nodes are linked together with a Mellanox dual-rail EDR InfiniBand network that can run bandwidth of 100G/sec.
What's a FLOP?
A "petaflop" is the ability of a computer to do one quadrillion floating point operations per second (1,000 million million). For comparison's sake, the Microsoft Xbox One X gaming system has 6 "teraflops" that allow it to perform 6 trillion floating point operations per second.
So each SUMMIT is roughly equivalent to the processing power of over 20,383 Xbox One X consoles (assuming they were somehow connected).
After the TOP500 list was released, analysts at Stifel Nicolaus noted the importance of the transition toward higher bandwidth networks within the top supercomputers:
Gear Up for Q2 Earnings Season
In the Global Week Ahead, stock traders will focus upon a raft of early second quarter earnings reports.
Results and outlooks will come from a number of financial firms in the USA, as usual. Goldman Sachs and Morgan Stanley are two big names to watch for.
But we shall also see some big tech names reporting Q2 results, such as Netflix and Microsoft.
I started with five Reuters updated world market themes. These are likely to dominate the thinking of investors and traders in the Global Week Ahead.
I ranked five headlines in order of importance for equities.
(1) The U.S. gets into a full-fledged Q2 season.
The U.S. enters second quarter earnings season in full-fledged fashion.
Sixty-one firms listed on the S&P 500 release earnings over the week. Twenty-seven of those will be financials.
- Key financial names will include BlackRock, BofA, Goldman Sachs, Morgan Stanley, Capital One and State Street
- Non-financial names will include the likes of Netflix, eBay, Kinder Morgan and Microsoft
Meanwhile, Europe’s Q2 earnings season begins.
Europe's second-quarter corporate earnings season begins in earnest, with analysts predicting robust average growth of +8.1% year-on-year.
The figures will be heavily flattered by the energy sector, where profits have been turbo-charged by the near 50% leap in oil prices over the last year.
To show just how good it has been, oil and gas firms are expected to report earnings growth of +72%, according to data from Thomson Reuters I/B/E/S. Stripping that out would see overall European estimates drop to more modest +2.9%.
The +8.1% headline figure is also well below the +20.9% growth expected from U.S. earnings season which is already into its stride. But as in the United States, investors will be watching for any signs that trade war worries have dented confidence, particularly if firms delay capital expenditure plans.
The firms that will set the tone in Europe include:
- Industrial firms Sandvik and SKF
- Tech firms SAP and ASML
- Miners BHP Billiton and Anglo American, which both report sales figures
(2) China’s GDP Growth doesn’t match with ‘Trade War’ rhetoric.
On Monday, the world's second-largest economy grew +6.7% in the last quarter year-on-year — matching expectations.
It looks set to meet the official 2018 growth target of around +6.5%, though the trade row with Washington has sharply increased the risks to the outlook.
Economists suspect the direct impact from the two sets of U.S. tariffs aimed at Beijing -- the $50 billion underway and another set of targeted tariffs on $200 billion of imports -- could drag China's GDP down by 0.3 percentage points in the longer run.
(3) The Fed’s Powell speaks to the Senate.
Fed Chair Jerome Powell will deliver his semiannual monetary policy report to the Senate Banking Committee on Tuesday, July 17th.
Powell's testimony will be closely watched as the Fed tries to navigate towards higher interest rates at a pace that keeps inflation under control but without going so far or fast that it slows the economy.
Already, investors have been raising red flags about the U.S. Treasury yield curve, which is at its flattest in nearly 11 years and at risk of inversion. An inverted yield curve involves short-term interest rates rising above long rates, which is typically a precursor of recession as it reflects tightening monetary policy.
Powell's last response on the yield curve was: "It's true that yield curves have tended to predict recessions if you look back over many cycles," before suggesting that this time was different. Investors will see if he has changed his tune.
(4) The U.S. and Russian Presidents meet on Monday.
U.S. President Donald Trump and Russian President Vladimir Putin hold their first summit in Helsinki on Monday.
Geopolitical analysts expect Putin to urge Trump to soften sanctions imposed over Ukraine, while Trump has said he will press Putin on everything from allegations of meddling in the 2016 U.S. election to the war in Syria.
European leaders will be watching the outcome closely, especially after Trump called Germany a "captive" of Russia at a testy NATO summit in Belgium, due to its plans for a major new gas pipeline.
EU chiefs have their own plans, too. Jean-Claude Juncker and Donald Tusk head to China on Monday for meetings with its leaders where there might be a show of unity against Trump's trade war maneuvers.
(5) Turkey and Argentina talk of their currency problems.
Turkey's new finance minister Berat Albayrak, son-in-law of the country's President Tayyip Erdogan, is expected to travel to Argentina for the G20 finance ministers meeting on Friday.
The trip will be his first international outing since Erdogan gave him the job as one of his first moves when he got his new powers as executive president.
Turkey's lira crashed to a record low after that decision and markets will be watching Albayrak's performance in Buenos Aires closely. Any sign of a slip up would be likely to crank up the pressure on the lira ahead of Turkey's next central bank meeting on July 24.
Top Zacks #1 Rank (STRONG BUY) Stocks—
Berkshire Hathaway: Yes, this big $191 a share stock is at the top of our #1 list. The Value score is C and the Growth score is D, though. Could this stock’s run be over?
Intel Corp: Another granddaddy of stocks is on our #1 list this week. The Value score is B and the Growth score is B. This shows you the chips have more room to run.
Chevron Corp.: Don’t overlook big integrated Oil & Gas firms this earnings season. The Value score is C and the Growth score is B for this major player.
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About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
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